Financial Development and Economic Complexity in Selected Sub-Sahara Africa: (2007 to 2024)

Abstract

Economic complexity is a decisive factor of structural change and economic growth in the long-run but has yet to be adequately investigated in terms of its relationship with financial development in Sub-Saharan Africa. The lack of import-sophistication persistence among the entire region and the superficial nature of financial institutions are driving factors of the investigation. To fill this gap, the paper focused on investigating the effects of financial development on economic complexity in 15 selected Sub-Saharan African Nations between the years 2007 and 2024 with particular attention being given to the contributing roles of broad money supply, domestic credit to the private sector, depositors with commercial banks, mobile cellular subscriptions, and commercial bank branches. Through the system generalised method of moment, the piece of evidence was found to include a positive and statistically significant impact of domestic credit to the private sector on the complexity of the economy, whereas the impact of broad money supply, depositors with commercial banks, and commercial bank branches showed a positive, though statistically insignificant, impact on economic complexity. On the contrary, mobile cellular subscriptions had a statistically significant negative effect on economic complexity. These findings demonstrate the significance of directing the credit to productive fields yet also demonstrate that financial growth and mobile penetration are not sufficient to create productive sophistication. The recommendations given in the paper are that policymakers should shift the focus of such broad financial growth to focused credit creation, serving the knowledge-intensive industries, and institute digital literacy programs to rebrand mobile technology as a production- and not a consumption-based tool.